UPDATE 1-FSB to name 29 banks on too-big-to-fail list - Russia

MOSCOW Nov 8 The Financial Stability Board, a
global regulatory body, will name 29 banks worldwide that are
"too big to fail" in an updated list that will be published next
week, Russia's top international finance official said on
Friday.

"Among the 29 banks there will be Chinese institutions,"
Deputy Finance Minister Sergei Storchak said, referring to large
banks that will have to hold a larger capital buffer than their
smaller local rivals from 2016.

After the failure of Wall Street bank Lehman Brothers in
2008, taxpayers were called on to shore up lenders in Britain
and the United States whose demise could have caused global
financial chaos.

Since then, governments have backed rules to make safer the
"bulge bracket" banks whose balance sheets may be too large for
national governments to shore up on their own, hence the 'too
big to fail' label.

The FSB, which coordinates global regulation for the Group
of 20 leading economies, last year named Citigroup,
Deutsche Bank, HSBC and JP Morgan Chase
as the banks required to have the largest cushion.

Storchak, who was speaking at a news conference in Moscow
after a scheduled plenary meeting of the FSB, said that there
will be some replacements in the updated list.

An original list drafted in 2011 had 29 banks and was
shortened by one to 28 a year ago. Banks are required to hold
additional equity of between 1 and 2.5 percent of risk-weighted
assets depending on which risk 'bucket' they are assigned to.

FSB Secretary General Svein Andresen told the same press
conference that priorities are to ensure that the globally
systemic important banks have adequate loss-absorbing capacity
if they do fail.

"The point here is to ensure that when these financial
institutions have exhausted their own equity capital, it is not
the public purse that pays for saving systematically important
banks," Andresen said.

"That means that there need to be coordination arrangements
across many countries to deal with the problems of these massive
institutions."

Some bankers say that solving the too-big-to-fail issue will
be hard but that success would make other post-crisis reforms
almost irrelevant.

The FSB is also working on addressing the problematic side
of shadow banking, paying increased attention to China, where
according to various estimates, shadow banking amounts to 40
percent to 70 percent of gross domestic product.

China is to submit its own report on the size of the
phenomenon by the end of the year, Andresen said. Storchak said
the issue was problematic.

"Authors (of a report delivered at Friday's meeting) were
forced to conclude that the work of the Chinese statistical
services until now does not make it possible to reliably
estimate the size of the problem," Storchak said.

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